18 March 2016

Notes from "Middle Scotland"

Who are Scotland's "squeezed middle", and what, precisely, are they supposed to be in the "middle" of? The right wing press have begun to do their collective dingers about Nicola Sturgeon's hints yesterday, that George Osborne's decision to hike the threshold for paying the higher rate of tax looks unlikely to apply in Scotland once the Scotland Bill powers are enacted.

In the current tax year, individuals across the UK pay 40% tax on earnings over £42,385. Come 2017/18, the chancellor intends to shift the threshold for the higher rate to £45,000. The First Minister has said cutting income taxes for "those on the highest incomes at a time when support for the disabled is being cut and at a time when our public services are under pressure, is in my view the wrong choice.”

For Alan Roden, and the Scottish Daily Mail, this is an outrage and a scandal. "Middle Scotland will pay highest tax in UK" their headline this morning screams, a "family tax grab". Mr Roden goes on to flesh out his indictment of this supposed Scottish Government larceny.

"Nicola Sturgeon yesterday confirmed that Scotland's squeezed middle will be punished with the UK's highest taxes to pay for the SNP's vote-winning policies. The First Minister said George Osborne's tax give away for nurses, teachers and police is "not a choice I am going to make."

With the paper's characteristic combination of sentimentality and nastiness, this opening paragraph summons up a ghoulish mental picture of the SNP government, persecuting the ordinary bobby, picking the pocket of self-sacrificing and industrious ward sisters, and shellacking that lovely, soft-voiced primary school teacher you cherished as a youngster. It implies that fairly ordinary workers, earning fairly ordinary pay cheques, will be "punished" if John Swinney decides not to make the richest sections of this country even richer. Even a little rummaging shows that this a breathtaking distortion, a falsehood, a flat out, old-fashioned lie.

First, start with the basics. The latest official figures suggest that the median annual earnings of a Scottish worker before tax is £27,045 - a mighty £15,370 short of any liability to pay the higher rate of income tax. Most Scottish workers need a pair of binoculars to see the upper rate of tax, never mind to benefit from Mr Osborne's unnecessary cuts. And what do you know? Precisely the same thing goes for each of the professions Mr Roden mentions in his forked-tongued news report. Nurses, teachers, police officers - the overwhelming majority of these public sector workers won't gain a single penny from Osborne's upper rate hike and won't lose a single penny if John Swinney refuses to play copy cat.

First, take nurses. The NHS in Scotland helpfully publishes workforce information, including data on the salary bands of its staff. Even more helpfully, they break down the data for nursing staff and midwives. So what does it tell us? At the end of December 2015, the NHS employed 59,287 nursing and midwifery staff. These staff are paid on nationally negotiated pay scales, running from £15,385 at the bottom of band 1 to £100,431 per annum at the top of band 9, depending on their seniority.

But the overwhelming majority of nursing and midwifery staff are employed on contracts of band 7 of lower. And - yes, you've guessed it - the highest point in band 7 for nursing staff in Scotland is a salary of £41,373 - still just over £1,000 short of paying the higher rate of income tax at its current level. In fact, according to official stats, at most, only2% of Scottish nursing staff are in a position to benefit from Mr Osborne's upper rate tax cut.58,111 staff are employed at band 7 or lower compared to just 1,176 above that, while the overwhelming majority of nurses and midwives (36,570) are employed on salary bands 5 (£21k - £28k) and 6 (£25k - £35k). Point to me, I think, Mr Roden.

So what about the teachers Nicola Sturgeon is supposedly "punishing"? Oopsie daisy. Same problem. Scottish teachers have their own nationally negotiated bands of pay, running from £22,416 for probationers, up to £35,763 at band six. Different rates apply for principal teachers, and for the higher ups in the head-teachers' offices, some of whom would benefit from the chancellor's upper-rate tax cut. But the overwhelming majority of Scotland's 48,000 teachers? Not a sausage. Even without a hike, they're still earning £6,622 a year shy of the current threshold to pay 40% income tax.

And police officers? Surely Mr Roden must have called at least one of these right? Surely the bollocks cannot be entirely unmitigated? Alas, alas. First, look at Police Scotland's pay and grading rules. Police constables take home £23,493 on their first year on the job, increasing to £36,885 over long service. There are no higher rate tax payers here. But what if you are promoted to sergeant? Then your pay jumps from £36,885 to £41,451 per year. Even on the current threshold of £42,385, police sergeants still wouldn't be paying a single penny of the higher rate of tax. By contrast, the Chief Constable (salary, £212,280), and his higher ranking subordinates would have to contribute more if Osborne's cuts are not implemented north of the border.

But just like nursing staff, and just like teachers, the overwhelming majority of police officers are not employed in senior positions, earning fatter pay cheques. The most recent statistics suggest that over 90% of Scottish police officers serve and are paid at constable or sergeant level who will not pay a penny more income tax, even if Osborne's tax plans are not implemented by the Scottish government. English police forces show a similar breakdown, by the by, with 93% of officers holding commissions as sergeants and constables.

So let's summarise. Reality, according to Alan Roden, is that George Osborne's tax cuts for the top 10% - 15% of highest earners represented a "tax give away for nurses, teachers and police" and that "Scotland's squeezed middle will be punished" by the SNP if a matching cut is not made to Scottish rates of income tax. Reality, according to the evidence, suggests that 90% of police officers would not be worse off, 98% of nurses would not be worse off, and the overwhelming majority of Scottish teachers would not be worse off, if the higher rate of tax was simply maintained at its current rate. Misinformation doesn't cover it.

So where do we find this fabled "middle Scotland"? If the Daily Mail's analysis today is anything to go with, wedged deep, deep in the midst of naked self-interest, rampant delusions, lies about our economy and and a fog of utterly misplaced self-pity.

34 comments
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Did you account for OTE here? My "basic" pay is 40k but with "rostered overtime" it goes to 47k as an example. Perhaps your average constable doesn't earn that but a few bumping at the top of the wage band plus o/T takes them over threshold.

This is a fair point, Cogload, though I don't think it fundamentally challenges the basic point. There's no way - from the stats I've seen this morning - to factor that aspect in. The datasets are limited. And of course, some folk might also have other jobs and investments which bump them upwards too, which aren't included here. But the overwhelming majority still won't be paying top whack.

The Mail also publishes articles like this: http://www.dailymail.co.uk/sciencetech/article-3477355/Aliens-controlling-SUN-UFO-hunters-claims-spotted-strange-ships-near-solar-surface.html

They're discredited, but they're not discredited *enough*. They no more deserve consideration in serious politics than the Beano. Fortunately I think Scotland is ahead of England on the trend of ignoring printed news altogether.

With respect, your analysis is far more naive and far less scrupulous than that which it sets out to counter. To read it one would think that Scotland was virtually without a private sector of employment as you consider it only in the most cursory way.

You say that Joe Public (sector) is not likely to see a money-in-bank gain from the new income tax threshold. Evidencing that claim, you mock the Daily Mail by conceiving of Joe Public as a policeman, nurse or teacher of whatever seniority, existing on a rigid-salary scale as those professionals typically do.

One might think it telling that you omit any consideration of physicians - a whole professional class whose hard shifts and inadequate remuneration we're forever hearing about. Perhaps even more tellingly, you give no consideration to overtime, bank-work and premiums associated with unsociable working hours. How much thought did you give to the necessity of those things and the relevant increases in earnings?

To the extent that you do entertain private sector impact, you mention average Scottish earnings across both sectors (circa £27,000). Of course, even that amount is considerably more than most people earn at present. Average earnings are, as the same SG paper shows, brought up considerably by professionals, management-types and directors (mostly of SMEs in Scotland, one imagines). No consideration is given in your blog for the extent to which those who bring up average earnings statistics are responsible for the employment of others. Nor is any consideration given to artificial wage inflation which is on the way if not already in process as a consequence of the new National Living Wage.

Is he writing to receive the approbation of an echo chamber or to persuade the unpersuaded? That's what I asked myself while reading this. Appealing - though somewhat in jest - to salt-of-the-earth workers and to those who have their backs will deter conservatives. Way back when, Éamon de Valera imagined the economic world to be participated in by teachers, policemen and nurses. He reduced Ireland to penury as a result. The Scottish Government's rigidity on this issue will hardly do the same to Scotland but it will not be a benign thing, much less a positive one. One can predict what will happen: face-saving measures post pressure on the SG from higher-earners; those measures will likely be made possible by knob-twiddling and lever adjustment elsewhere. Ultimately, we'll have an elaborately rationalised tax policy all in pursuit of another purpose

"You say that Joe Public (sector) is not likely to see a money-in-bank gain from the new income tax threshold. Evidencing that claim, you mock the Daily Mail by conceiving of Joe Public as a policeman, nurse or teacher of whatever seniority, existing on a rigid-salary scale as those professionals typically do."

Did you read the same article as I did? Mr. Tickell is replying to claims about the effects on the salaries of police officers, nurses and teachers made by the Daily Mail:

"Nicola Sturgeon yesterday confirmed that Scotland's squeezed middle will be punished with the UK's highest taxes to pay for the SNP's vote-winning policies. The First Minister said George Osborne's tax give away for nurses, teachers and police is "not a choice I am going to make."

The quote above is from the Daily Mail and this blog article is a response to the specific claims made about the salaries of police officers, nurses and teachers. It doesn't presume that only public sector workers count or that only certain types of certain public sector workers count.

Your reading of this article is both strange and strained. Perhaps some laxatives?

I can only think that you didn't read my reply in full or have misunderstood it in your haste to disagree.

I was then and am now aware of the blogger's intention. I acknowledged that his decision to examine the earnings of the professionals he did was driven by the Daily Mail as opposed to his own whim ("mock"; "somewhat in jest"). Or, as 'aedan' puts it that the "policeman, nurse or teacher concept was established by someone else".

The message of this blog is broader than an exact debunking of Daily Mail hysteria though. Come on. One doesn't excoriate every inaccuracy one reads. Inevitably one devotes less time to highlighting inaccuracies incidental to a larger, agreeable opinion.

Anyone might've pointed out the fatuity of suggesting that nurses, teachers, policemen and all of their pockets are out to be raided by the Scottish Government (hence my echo chamber comment); it is a boring habit of those on the left to point out the misinformation and bias of newspapers as though they were owed something better. Newspapers owe nothing whatever to the public and are in the business of bias and misinformation. Long may it be so that one has to learn how to sort the right from the wrong.

(Getting back...) the blogger's analysis is unscrupulous in being tied to the salary bands of the (public sector) professionals discussed. Overtime, bank-work, unsociable working premiums aren't mentioned and equivalent private-sector professionals aren't considered (there are quite a lot of nurses now in the private sector, for example). Many precisely because the opportunities are more lucrative (£) than the NHS.

All the other things I say about wage-inflation and the extent to which high-earners are responsible for economic prosperity stand of course. The blogger would've done better to take those into account.

If you go on to read the article in the Mail, it does bring more accurate and less hysterical stuff to the fore. For example, about how many people might be worse-off in Scotland as opposed to elsewhere in the UK should tax policy diverge in the relevant way.

The Mail, in its *ahem* way, coded the message that middle-class Scotland would be worse-off than its English equivalent. That will be true in terms of earnings should the SG stick to its guns. That the blogger here chooses to pick up on lazy journalism rather than countenance the bigger point about tax-cuts for rich(er) people is disappointing and - I thought obviously - what I was getting at.

Tax cuts for higher earners work. Greater actual tax takes (£) and more participation in taxation are almost always the outcomes. The Scottish Government would do well to acknowledge as much.

If you were aware of the blogger's intentions then why did you write this, "Evidencing that claim, you mock the Daily Mail by conceiving of Joe Public as a policeman, nurse or teacher of whatever seniority, existing on a rigid-salary scale as those professionals typically do."?

Aedan. I have the twofold impression that I won't be able to dissuade you of my misunderstanding or get you to countenance the masochism of having the tax threshold in Scotland set lower than rUK.

I wrote as I did because the blogger wrote what he wrote below.

"Most Scottish workers need a pair of binoculars to see the upper rate of tax, never mind to benefit from Mr Osborne's unnecessary cuts."

The "Joe Public" I imagine is the average Scottish worker. The sector (in brackets) was an allusion in anticipation of the sort of workers up for discussion (a needless allusion perhaps!). For the arduous character I have given your life and anyone else's, I am sorry.

Paul, Paul, Paul - if a future Scottish government (SNP no doubt) decides to use future devolved powers to over-turn the raising of the tax band, it will mean people earning between £45,000 and £100,000 in Scotland will not save about £400 per year compared to their counterparts in the rest of the UK:

"The £2,000 rise in the starting point for 40% tax means a £400 annual saving for everyone who earns between £45,000 and £100,000. After that level of income, the value of the allowance tapers off."

Are you really sure that the hard-working, wealth-creating, entrepreneurial types you imagine earn these salaries are going to cease or curtail their endeavours over less than £8 per week?

Are they such fragile little creatures?

I don't know if Tim Berners-Lee salary in 1990 would have put him into the 40% higher tax bracket if he'd been liable for UK income tax (although I assume he earned more than the equivalent of £20,700) around the time he helped develop one of the greatest wealth creation machines yet invented. I *do* know that his salary and Robert Cailliau's salary were funded by the states which were members of CERN at that time, making them effectively public sector employees. Trillions of dollars of wealth have been generated by the world-wide web, with zillions more to come. In its essentials it's the product of the public sector. And a product which already has generated and will generate so much wealth for the private sector that every penny, cent or centime of tax paid in the millenia before its development has been repaid in full and much, much, much, much, much, much more.

I'm not without sympathy for what you say but I'm the prisoner of what I know about economic history.

I can hardly quarrel with your figures re how much it'll cost higher earners. Petty cash, I'm sure. It's the message of the policy that'll do the damage (rightly or wrongly). You'd say wrongly. I wouldn't say at all.

The creation of any uncertainty about taxation, especially where the doubt inclines to its increase, will take the wind out of Scotland's economic sails.

No economy ever faired better than its competitors as a direct consequence of imposing higher taxes on its participants. Doesn't matter if it's pennies.

Progress and competition always inclines to less taxation, not more. If Scotland can't keep pace with the UK, it'll be looked on negatively, to the detriment of its people.

"Progress and competition always inclines to less taxation, not more. If Scotland can't keep pace with the UK, it'll be looked on negatively, to the detriment of its people."

If that were true, countries with zero tax rates would be the wealthiest and happiest on the planet. Denmark has tax rates which are significantly higher than in the UK - it had the highest tax to GDP ratio among OECD countries in 2014 (source: http://www.oecd.org/ctp/tax-policy/revenue-statistics-ratio-change-latest-years.htm).

Far from being a miserably uncompetitive state, not only is Denmark the third easiest country in the world in which to do business, (source: http://www.doingbusiness.org/data/exploreeconomies/denmark) its people rank themselves as the happiest in the world (source: http://www.independent.co.uk/news/world/europe/denmark-happiest-country-for-third-time-united-nations-report-a6934196.html).

I'm afraid that yet again your claims don't fit the facts - there is no evidence that a low tax economy is necessarily more competitive than a high tax economy.

Despite my use of the world always, I wasn't thinking of failed states or zero-tax states where economic development is in its embryonic stages. And, let's have it right, you knew as much.

You might've been more scrupulous in your research. Tit-bits pulled from five minutes on Google won't cut it.

Is the historical trend of income taxation in Denmark an upward one - say in the past 40 years? Corporation tax? Any other taxation at all? The answer is no.

Go look into the operation of corporation tax in Denmark. Not just the rate, but its scope. Then look at the rates and arrangements of its neighbours. You'll see why it succeeds in being competitive. And it isn't because it solicits the pockets of businesses. Nor, indeed, is it because it solicits the pockets of people coming into Denmark to work. Special (lower) income tax rates will apply on application to those people. Easy to see why: they wouldn't have a penny to their name in their home country if the Danish rates applied.

We've never had the demographic harmony or political consensus in the UK to create a behemoth welfare state a la Scandinavia. And it's a good thing too - no state will sustain it perpetually, as the Scandinavian countries are finding out. The subsidised education, the healthcare. If you subsidise these things you chain them to the state's finite coffers and the larger economic world cares not a jot for those coffers.

So the near-utopic picture of Denmark is rubbish. Academic-inflation, as it is sometimes known, is a problem in all Scandinavian countries. For the labour market, that is. Lots of qualified people not in demand. Devalued degrees and all the rest of it. Same as Scotland IMO.

As for happiness, well, the homogeneousness of Denmark over time, its trade-links, its geography, its EU membership... Fuck. It would've taken something for them to balls it up. They're not sitting pretty because they've done things differently. They're sitting pretty because things have been done differently to them (in history).

I'm not going to change your mind - I can see that. But I can't go without saying this: think about how you're arguing.

Imagine I said: "Oh, here is (really) low-tax Switzerland overtaking Denmark in a more recent self-reported happiness study". As I could well do: see John F. Helliwell, Richard Layard, and Jeffrey Sachs, eds, World Happiness Report 2015 (New York: Sustainable Development Solutions Network, 2015.

Would I win the argument? Of course not. I'd only show people that my mode of argument was a cheap one. Firing superficial counterpoints about makes the whole enterprise of argument a bit boring for my taste.

The study I cited is from 2015. Face reality Paul - there is no evidence that a low-tax economy *necessarily* leads to greater productivity, competitiveness or happiness. Scottish society has many of the features of Danish society and it could succeed in achieving some of the best outcomes that Denmark has achieved given the right mixture of policies.

Bottom line. There will be an election in May. If Nicola doesn't pass on the tax benefits that's within the Scottish Govts powers to do so. The benefits are being passed on by a Tory Govt we didn't elect, but the Scottish people will be able to choose their own Govts in may. What I would say though is another factor people have to calculate in here in their considerations is free tuition fees, free prescriptions and also the Council tax freeze that has delivered many benefits to these Middle earners over the years. That and just knowing that the Scottish Govt have done much to it mitigate the effects of austerity for many over the years. I hope she doesn't pass on the benefit and I hope the Labour Party support her after their 1p on the £ position.

There are certainly overtime considerations for nurses and police officers, not so much so for teachers, I imagine. All of those public sector staff still have the benefit of a final salary pension scheme. One of the benefits of those schemes is that the contributions made are not subject to tax. So each of these people will have about 6-10% to deduct from salary on top of the £42,385 before paying higher rate tax.

By my admittedly shaky arithmetic, the 6.5% superannuation contribution for teaches, which comes off before taxable income is determined, makes the de facto threshold £45,140. While I was working in a promoted post, the 6.5% kept me just out of the upper tax bracket. (Can't remember whether AVC's also had an effect).

I could countenance many things, up to, but not including, a decent tune from Mr Lloyd Webber. I don't give everything which could be countenanced serious consideration and that particularly applies to Mr Lloyd Webber.

I'll make like the Scottish Government and stick to my guns mate. If ever the left admitted the possibility (countenanced) that a lower tax threshold in Scotland might be economic masochism, I'd... Reconsider.

As far as I can see, the whole shebang is that Osborne is intending to raise the threshold for higher earners, and Swinney is intending the current threshold to remain. By changing nothing, the Scottish Government will gain (slightly) more tax income p.h. than doon sooth from the tax earners in this bracket although there are hardly any compared to Eng/Wales. I really don't see why anyone in that tax range should be worried they're not paying More tax here, but the same as now. Unless there's something I'm missing.Perplexed of Edinburgh.

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